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Friday, 16 May 2014

Procurement Strategy For Single & Sole Source Supplier

Most of the times
Procurement professional faces hard time especially when they are in a process
of negotiation with single source supplier and that even get worse when
commodity is highly consumable. So here is the strategy which can help
procurement specialist to negotiate with single source supplier.

There are two types
of supplier’s single source supplier and sole source. Both of these are
different from each other and require different strategy for negotiation,

·Single SourceSupplier: Multiple vendors are
available but buying organization chooses to contract with one supplier because
of his services, Quality or PR.

In
Single source case there are multiple choices available and different
organizations have the capability to provide the desired product or service,
the buying organization has the opportunity to use the principles of strategic
sourcing process, bid competitively, negotiate, and select the different
supplier that offers best overall Total Cost for the organization.

·Sole Source Supplier: There are no alternatives vendor
of specific brand product is available a sole source supplier is the only
source for the product, material, or service that buying organization needs to
purchase.

In Sole source case the process
become very difficult to deal with and negotiate. In this circumstances you
increase your negotiation power . But how ? when dealing with Sole source
suppliers? To build a more powerful negotiation position, buyers need to:

·Value
your Brand name.

·Identify
how important / costly is for the supplier to lose you as a customer.

·Estimate
both parties’ needs in the negotiation and trade on interests that both parties
value differently.

·Estimate
supplier consequence of No Agreement. Determine the short- and long-term impact
and costs to the supplier for not reaching an agreement.

·Use
leverage of a long term contract.

·Leverage
company-wide spend. Most monopoly suppliers sell (or have the potential to
sell) other products to your organization for which alternate suppliers exist.

·Explore
segmentation approach. Present the idea of competitively bidding part of your
requirements.

·Access
the importance of contract from supplier site.

Often, Sole source
situations become very difficult for the procurement department, It become more
easy if end user specify special or new requirements (specifications) for
a product or service from a specific supplier. Once this occurs, which was
excluded from the process of developing specifications, to make the change. As
a result, preventing sole source situations from happening in the first place,
require raising awareness, coordination, and cooperation among various
functions within an organization.